Ladbrokes Coral Group plc - Q4 update leaves several questions unanswered; no material change to forecasts for the time being

Davy Research
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The headline from Ladbrokes Coral’s Q4 trading update on February 9th was positive; 2017 group revenues came in in line with expectations, while operating profit was said to be at the top end of management’s expectations. But the statement raised questions. Principally, what is going on with underlying staking across the business? Very strong gross win margins in Q4 led to reduced customer recycling and as always, the challenge is figuring out how much any staking weakness was due to recycling and how much was underlying? No detailed numbers were provided on either margins or staking and, therefore, it is practically impossible to make that assessment at this point. As a result, we are inclined to leave forecasts broadly unchanged for the time being. We think investors should remain mindful of management’s previous guidance that OTC stakes are likely to drop circa 5% per annum. Current consensus doesn’t capture such declines.